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Goldman's Green Push Comes With Trading Twist -- WSJ

A wind farm in Scranton, Pa., sitting over ancient coal seams, will soon power Goldman Sachs Group Inc.'s data centers in New Jersey.

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The Wall Street bank said Monday that it has agreed to buy 68 megawatts of electricity from the plant, which will come online in 2019. It is the first such agreement struck by a bank, according to trade group Business Renewables Center, and pushes Goldman closer to its goal of procuring 100% of the energy it uses from renewable sources by 2020.

The deal is Goldman's effort to stake a claim in a hot corner of the energy-trading market -- and to try to catch up with rivals.

Citigroup and Morgan Stanley are already big in the renewables-trading space. Goldman recently hired a Citigroup trader, Moe Hanifi, who will join Harry Singh and Joram Cukierman in spearheading the firm's effort.

Commodities trading has been a tough business across Wall Street since the financial crisis due to stricter capital rules. It was among the businesses that Goldman blamed for disappointing trading revenues last quarter.

Goldman won't just be in the renewables market for its own needs. The firm's commodities arm has been building a business to connect corporate buyers of electricity with developers.

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That group, reporting to commodities chief Greg Agran, will manage the 15-year electricity contract, protecting Goldman from price swings, grid congestion and other risks. It hopes to market that same service to a growing group of companies that are striking their own power agreements, Mr. Agran said in an interview.

The market for such deals has grown from next to nothing in 2012 to 1.5 gigawatts last year, according to the Business Renewables Center.

Large technology firms such as Apple Inc. and Google parent Alphabet Inc. were early and remain the biggest players. But they have been joined by the likes of Anheuser-Busch InBev NV and General Motors Co.

As wind and solar prices continue to fall, demand is likely to grow. The catch: "What developers want to sell and what these companies want to buy doesn't always match up," Mr. Agran said.

Goldman hopes to stand in the middle. The firm's traders, for example, can use derivatives to transform short-term contracts that companies typically want into 20- or 25-year terms that developers prefer. Goldman also can aggregate orders from smaller companies, or buy big slugs of power from developers and syndicate it to many buyers.

Goldman's traders are working with the firm's investment bankers to drum up interest from corporate clients, Mr. Agran said.

The Scranton project, which is being developed by NextEra Energy Inc., will produce power equivalent to Goldman's usage across its North American facilities, said Cindy Quan, who runs the bank's real estate sustainability efforts. Goldman currently gets 90% of its power from green sources, mostly by buying "credits" created by other projects.

Chief Executive Lloyd Blankfein recently criticized President Donald Trump's decision to pull the U.S. out of the Paris climate agreement, tweeting that the decision was "a setback for the environment and for the U.S.'s leadership position in the world."